IFM05600 - Investors in property authorised investment funds (PAIFs): non-resident investors

Property income distributions (PIDs) made to non-resident investors

PIDs receivable by non-resident participators are in general chargeable to income tax (regulation 69Z18(2) SI 2006/964) in the same way as they are for UK-resident income taxpayers – income tax is deducted at the basic rate.

Although the PIDs are treated as income from UK property, the Non-Resident Landlord Scheme does not apply (as the PID is paid under deduction of basic rate income tax).

PAIF distributions (interest) made to non-resident investors

For the purposes of liability to UK income tax, a PAIF distribution (interest) is treated as a payment of interest originating in the UK.

PAIF distributions (dividends) made to non-resident investors

These are treated in the same way as dividends paid by UK companies, and no tax is deducted.

Treaty claims for repayment of tax deducted

If the recipient is resident in a state with which the UK has a double tax treaty, they may be able to make a treaty claim for payment of some or all of the UK tax withheld, depending on the provisions of the relevant treaty and the circumstances of the recipient. Claims are processed by Business Tax & Customs – Operations in the usual way.

The overall withholding rate which actually applies to the whole (three part) distribution will vary depending on the mix of types of income in the distribution and so the percentage that can be reclaimed may vary from one distribution to another.

Hence, a treaty claim will be required in respect of each distribution.

Non-residents trading in the UK through a permanent establishment

Non-residents carrying on a trade in the UK through a permanent establishment are required to bring the relevant distribution into account in computing their chargeable profits for corporation tax in the same way as UK companies (see IFM05400).